ACT Property Developers Bill 2023
The latest attempt to slowdown the runaway train that is housing.
A room with a view: starting at $3.2 mil.
The Richest Man in Rome was known as Crassus. Aside from his many other investments, he owned one third of all buildings in the city, and almost all of the Insulae: The cheap housing that the poor rented. These properties were so poorly constructed, they often burned down or collapsed on the inhabitants. Despite constantly killing off his tenants through shoddy craftsmanship, his 500 architects and builders ensured that Crassus was the largest supplier of housing every year. He also owned the only fire brigade in the city and would charge tenants for their use if their houses were alight.
Due to the massive growth within Rome, these Insulae were always in demand, meaning Crassus often was able to re-rent the properties without fixing any of the fire damage. I assume he probably removed the charred remains of previous tenants before the new ones moved in but I can’t prove that.
It appears, through letters written by both Crassus and another landowner, Cicero, that despite the massive number of properties that they created, profits on properties increased every year, and urban real estate came to be a greater portion of their wealth than agriculture and rural land.
I have no idea why I told you that, or how it could be relevant in the modern day… Best ignore it.
People seem to be a little worried about the growing housing issues in Australia. Aussie tradespeople are paid wages equivalent to aerospace engineers and yet our housing is about as well made as something coming out of Boeing. Mold, roofing leaks and cracking concrete are all common sights in properties build in the last twenty years, our history of housing insulation leaves a lot to be desired and the term “double glazing” is only ever used as a search term in porn.
Despite being one of the most expensive countries for houses in the world, the buildings we make are rubbish.
Thankfully, there are a few reasons to be hopeful about our housing future… at least in the smallest territory in Australia, with the ACT Property Developers Bill 2023, proposed by Minister for Sustainable Building and Construction, Rebecca Vassarotti.
See, the bill requires property developers to take on a lot more risk than usual. Which is difficult for developers, since their usual risk tolerance is 0.
The gist is that if developers screw up a house, they will have to pay for the rectifications. This can be backdated for up to 10 years, in case the house doesn’t sink into the lake immediately.
Any defects found in the first two years? Pay up.
Any defects caused through subcontractor that you hired? Pay up.
Want to sell properties off the plan (Make people pay for them before the entire property is ready for sale? You’d best have a license for that or else you can pay up.
Do you have rectification insurance on these properties? I’d hope so, or else you will lose your license to sell… and have to pay up. Fun little fact, this type of insurance is almost unheard of in Australia as almost no mainstream insurer is willing to offer it, which is a fantastic testament to my point.
And the biggest shock in this bill: The director of a property development company can be held personally liable for the errors their company made.
That means you can’t just declare bankruptcy like Michael Scott and abscond to Lebanon with a payout that you awarded yourself for all your diligent work.
Now, I think the likelihood that this bill goes through without massive changes is about as likely as my girlfriend taking an active interest in my finance articles, but the main argument against passing the bill is an exciting blend of defunct economics, willful ignorance and blatant self-interest.
Any regulation of the property development market will “will only deter investment, exposing developers to unreasonable risks and forcing them to do business elsewhere.”
“The ACT's proposals will almost certainly limit the supply of new homes to buy or rent in the ACT, driving up prices as the Territory faces an affordability crisis and preventing the ACT from meeting its own stated housing targets and those under the National Housing Accord. It will negatively impact economic activity and jobs”. Submission-002-Property-Council-of-Australia-ACT-and-Capital-Region.pdf
See, I love this argument, because its effectively telling on yourself that you already know that the last structurally sound building that these property developers made was their Grade 3 playdoh house for which they only got a B+.
Now, even though we discussed why the ‘Supply’ argument in Australian housing is a myth, perpetrated by men so crooked, they could hide in the shadow of a horseshoe, let’s pretend that it actually worked, and that by allowing dogshit houses to be constructed, we are actually lowering the costs for first homebuyers.
Housing is considered an asset, as well as a place to store your hypo-allergenic caboodles, but they are not interchangeable assets.
The more defects a property might have, the more maintenance/operating costs. This means, more money being paid out when you inevitably find out that elegant walk-in wardrobe is made out of tanbark and old 3rd grade assignments.
These higher costs are incurred over time instead of up-front, meaning the costs are hidden and paid out by the buyer, and not those creating said costs. I would accuse this of being a moral hazard, but I can’t guarantee property developers know how to spell it.
The Efficient Market Hypothesis would argue that, since buyers would recognize those higher long-term costs of owning these dodgy buildings, they would demand a lower initial price. That is to say, if they knew they would have to pay $10,000 of additional costs to fix up building defects, they would just agree to buy the property for $10,000 less.
Of course that would mean that, as the standards for housing have slipped, so has the price of housing and… oh…
Well… maybe if we look a little further back and … oh….
Of course, there are some other arguments suggesting that since the property developers aren’t the ones actually building anything, we should be regulating the builders and subcontractors, since they are the ones making the defects in the first place.
This makes perfect sense, since in a capitalist system, risk should never be held by the employer who gains the most profits, but by the employees who merely carry out his orders.
There were almost no regulations surrounding housing in ancient Rome, which led to Crassus’s legendary success, and as many supply-side pundits argue, our current regulations and proposed changes are clearly limiting the success that property developers could achieve, and by extension the greater trickle-down prosperity that the rest of us can expect to enjoy.
Personally, I feel that the Insulae being built today should be regulated to ensure that we can at least trust in a certain degree of quality, and while it is true that Crassus eventually died by having molten gold poured down his throat…
…. actually, I may have just changed my mind about regulating this industry…
It is anticipated that this bill will be put to vote around June or July this year, so I strongly recommend you all message your support for this bill, (or condemnation of this egregious breach of a property developer’s right to screw over the public) to VASSAROTTI@act.gov.au
The Bill in question: